KEY UPDATES
Nothing New at
Jackson Hole
One of the most anticipated events last week was the
Jackson Hole summit where the Fed boss Ben Bernanke delivered his speech. Some
had expected some new hints over the Fed’s new policy measures, but going into
the event such optimism dimmed and revised to “nothing new” expectation. Indeed,
as I had expected too, there were nothing new delivered at the summit as
Bernanke only re-emphasized his and his fellow FOMC members’ earlier
statements. In the end, the Fed Chairman simply concluded that the Fed will
provide policy accommodation as needed. The implication of the statement should
be non-negative as the markets had already plunged prior to the event and
rebounded just before and after the event.
All Eyes on
Payrolls
Payrolls will set the tune for the week. After
adding 163k jobs in July, the U.S. economy is expected to add another 125k in
August. A worse-than-expected figure would add pressure to the FOMC to deliver
its stimulus sooner rather than later, while a better-than-expected result
could diminish a swift move by the FOMC, especially if the figure proves to be
too strong (i.e. over 200k). Unemployment rate, which was based on a different
set of respondents, is seen as staying at 8.3%. The U.S. markets will be off on
Monday however, to observe the Labor Day holiday. Another key upcoming event
will be the FOMC meeting which could be pivotal or just like usual, ended with
nothing new.
Europe Back in
Business
Coming into September, the European officials will
return to meet and discuss about dealing with the current crisis. Greece and
Spain will be under the spotlight. While Greece will continue to need more time
to deal with its reform efforts, Spain will try not to use the European funds
to deal with its bank recap. Recent remark by PM Mariano Rajoy stated that the
country will wait until more details over terms and conditions of a
full-fledged bailout are clear. If it’s for the best interest of the country
then Spain will take the bailout.
European Central Bank’s upcoming meeting will also be
a key event as the market wants to hear something new from Mario Draghi. Again,
this meeting could prove to be giving out nothing new as well as the ECB will
want to wait first for the German court decision over the European funding.
With Chancellor Merkel’s recent remarks, it is likely that the court will
deliver positive result, enabling the ECB to make its next move, possibly with
additional bond purchases. One concern is coming from Bundesbank chief Jens
Weidmann who reportedly threatened to resign should the ECB proceed with its
bond-buying plan.
China’s
Production Stayed Soft
At least in August the PMI for manufacturing sector
has fallen below the key 50-mark, which is the borderline between expansion and
contraction. The National Bureau of Statistics reported on Saturday that PMI
fell from 50.1 to 49.2. For the fourth consecutive month, new orders index fell
to 48.7 while export stayed at 46.6. Although the data was soft, the result
should be a non-surprise event as it had been indicated by the flash PMI
released earlier by HSBC. August decline could as well put more pressure on to
the Chinese authorities to ease further in order to stabilize the currently
slowing growth. However, the latest decision on repurchase agreement suggested
that China is trying to avoid unleashing aggressive policy action for the
moment.
Has ELSA Seen the
Bottom?
The strong boost in the portfolio was more or less
contributed by the jump in ELSA. Whether the rally can finally put an end to a
miserable run recently is remain to be seen. Clearing the 200 hurdle is expected to be a good sign for the stock to advance even higher, back to our entry point. Others have shown no or little
improvements recently as the entire market seemed to have waited for September
for policy hints from U.S., Europe and China.
Days Ahead
September has arrived and various events will put
the market on guard as surprises may show up along the way. The Fed is expected
to deliver its decision on monetary policy in its FOMC meeting this month while
the same also applies to the European Central Bank. Draghi may have to clear
out the resistance coming from the Bundesbank first before delivering another
bond-purchase program. Yet, a surprise may come from the German court over the
ruling on the European fund although this is considered as somewhat less likely
to happen considering the impact of such ruling. Spain has opted to wait until
they have all the details clear before taking on a full-fledged bailout. Spain is
also considering doing Bankia’s recap without using the European fund available
to them. If Spain is able in doing so, it should be a major boost of confidence
for Europe. Elsewhere in Asia, China remains the key hotspot as the market will
want to see what the Chinese government do as data has continued to show that
the economy continues to slow down. Locally, market sentiment towards the
Bakrie-7 stocks, especially BUMI, remains an issue alongside the previously
mentioned global factors.
Written by Unknown
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